Corporate - Corporate residence

Last reviewed - 19 December 2023

A company is treated as a resident of Indonesia for tax purposes by virtue of having its establishment or its place of management in Indonesia.

Permanent establishment (PE)

Under the Income Tax Law, a non-resident company may be treated as having a taxable presence if it runs a business or conducts activities in Indonesia, which can be in the form of:

  • a place of management
  • a branch of the company
  • a representative office
  • an office building
  • a factory
  • a workshop
  • a warehouse
  • a room for promotion and selling
  • a mining and extraction of natural resources
  • a mining working area for oil and natural gas
  • a fishery, animal husbandry, agriculture, plantation, or forestry location
  • a project of construction, installation, or assembly
  • the furnishing of services in whatever form by employees or other person, insofar conducted not more than 60 days within a 12-month period
  • a person or corporation acting as a dependent agent
  • an agent or employee of an insurance company that is not established and domiciled in Indonesia that receives insurance premiums or insures risk in Indonesia, and
  • the computers, electronic agent, or automated equipment owned, leased, or used by an electronic transactions provider to conduct business via the Internet.

Domestic regulation on PE also acknowledges the concept adopted under the Organisation for Economic Co-operation and Development (OECD) and United Nations (UN) Commentaries that under the operation of a tax treaty a business form that is used by a foreign subject to carry on only ‘preparatory or auxiliary’ activity in Indonesia will not create a PE.

Where the non-resident company is resident in a country that has a tax treaty with Indonesia, the rules on a PE creation may be changed; usually there is a longer ‘time test’ for certain activities performed in Indonesia.